This application relates generally to financial transactions. More specifically, this application relates to processing of financial transactions using debit networks.
In a modern commercial environment, there is an array of different financial products that consumers have available to them in executing financial transactions. Some of the more prevalent forms of transactions may be characterized as credit transactions, debit transactions, and stored-value transactions. Each of these transactions differs in the manner in which access to funds is provided to the consumer. For example, credit transactions are supported by funds provided by a creditor to a customer. The principal example of such credit transactions are credit-card transactions in which the creditor issues a card to the customer that the customer may use as a presentation instrument to identify a credit account. When the transaction is executed, funds are drawn against the credit account, which usually has a pre-established credit limit, to support the transaction.
The other major types of financial transactions also make use of presentation instruments. A stored-value transaction is one in which funds have been specifically set aside and associated with a presentation instrument so that they may be used to support a transaction. In most cases, such stored-value instruments are anonymous in that the funds are associated only with the instrument and not with any particular person. This has the advantage that such instruments may be easily transferred and they find wide utility as gift cards. This gift aspect is frequently reinforced by imposing restrictions on the merchant with whom transactions may be executed with the set-aside funds.
Debit transactions may also make use of a presentation instrument and are similar to stored-value transactions in that specifically identified funds are used to support the transactions. The source of funds for a debit transaction is specifically identified with a holder of the account that holds the funds and this account is usually a demand-deposit account maintained at a financial institution. As such, the funding of the account varies over time as deposits and withdrawals are made from the account in response to receipt of wages, paying bills, etc. Debit accounts generally differ from stored-value accounts in that the account owner is provided with open-ended access, with all activity being based on the currently available funds level. Stored-value transactions might be considered to be a subset of debit transactions in which some money is set aside, but where there is no free access to funds in the account. For instance, some stored-value accounts do not allow additional deposits, permitting only withdrawals to be made from the accounts in accordance with governing restrictions of the accounts.
The ability to transfer funds from a demand-deposit or other type of account in such a short time period is enabled by the use of one or more electronic networks provided as part of a financial infrastructure. Communications routed over these networks permit decisions to be made in real time whether the criteria for executing a transaction—valid accounts are identified, there are sufficient funds in the supporting account, identity-verification protocols have been satisfied, etc.—are met. Such debit transactions are of particular interest to many merchants because they remove the element of trust that is required of other transactions. The time lag of check transactions runs the risk that the check will be refused, forcing the merchant to expend time and effort in recovering funds due for a previously executed transaction. And while credit transactions usually involve some authorization process, there are mechanisms that may be used after the fact to prevent the payment from being made. From the perspective of merchants, debit transactions have the advantage that funds are received substantially contemporaneously with execution of the transaction itself. If there are later disputes regarding the transaction, the merchant is in the superior position by having possession of the funds at that time.
There is accordingly a general need in the art for improved methods and systems of supporting debit transactions.